Exploring the latest risk and regulation issues in financial services.

IFRS 17: New Measures, New Perspective

09 April 2019

By Alex Bertolotti

Over the past year and a half, the insurance industry’s focus for IFRS 17 has primarily been on risk assessments, vendor solutions and implementation plans. These topics have of course warranted their time in the spotlight, but the new agenda item in the market is key performance indicators (KPIs). How do KPIs change in a post IFRS17 world and how does this influence how a company tells its story to the market?

The reason KPIs have been causing a stir in the industry is that, although IFRS 17 will not change the amount of profit you make over the lifetime of your insurance business, it does have the potential to massively shift the trajectory of these profits. The impact will be felt not just in financial statements, but also in many of the KPIs that are used to run businesses and shape how businesses are judged by analysts and investors. As such, people are keen to get on the front foot and try and scope out potential challenges before they arise.

With this in mind, I wanted to draw your attention to the first edition of our ‘IFRS 17: Impact on IFRS 17 on insurance performance and reporting’ series, New Measures, New Perspective. In this paper, we analyse the suite of KPIs communicated to the markets by 20 of the largest European insurers, assess how these metrics are likely to be affected by IFRS 17, and discuss how companies may need to respond to this. We also delve into what are the potential wider implications and how you can manage these changes with minimal business disruption.

It was fascinating to investigate, and really drew my attention to how IFRS 17 will affect profit and cash based measures in different ways. My advice would be, take a look at this now, model IFRS17 numbers on existing KPIs to see what impact it will have, then knock on the CEO’s office door and raise the topic. The sooner the senior members of an organisation start to see how their story needs to be shaped, the better. It may also divert attention from the cost of the project, and start to focus on value, which is not such a bad thing.

Looking ahead to the next few months, keep an eye out for upcoming articles in which we will be looking in more detail at how to get up to speed with the likely changes in KPIs and what analysts want from your business to help them understand your performance.